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AT & T Global Network Services (India) Pvt Ltd. Versus DCIT, Circle-2 (1) , New Delhi

2017 (9) TMI 1149 - ITAT DELHI

Disallowance towards interest expenditure incurred in relation to the ECBs invoking the proviso to section 36(1)(iii) - AO observed that the ECBs have been utilized for acquisition of capital assets which have not been put to use, and thus the interest incurred till the date such assets have been put to use should be disallowed - Held that:- This ground of appeal has already been decided in AY 2009-10 and AY 2010-11 by orders of even date deleting the disallowance. Since there is no change in fa .....

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l of the assessee is allowed. - Disallowance of Support Service expenditure - Held that:- This ground of appeal has already been decided in AY 2009-10 and AY 2010-11 by orders of even date deleting the disallowance. Since there is no change in facts in this year we direct the ld AO to delete the disallowance accordingly for this year too. - Transfer Pricing Adjustment - Held that:- As relying on earlier AYs we set aside this ground to the file of the ld AO with direction to determine A .....

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8-9-2017 - SHRI I. C. SUDHIR, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER For The Assessee : Shri Kanchan Kaushal, CA Shri Aditya Gupta, CA Shri Sandeep Puri, CA Ms. Chinu Bhasin, CA For The Revenue : Shri N C Swain CIT DR Shri T M Shivkumar, CIT DR ORDER PER PRASHANT MAHARISHI, A. M. 1. Appeal No 292/Del/2016 is filed by the assessee against the order of Deputy Commissioner of Income Tax, Circle-3(2), New Delhi (AO) passed u/s 144C(13) of the Income Tax Act, 1961 in pursuance .....

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hich is bad in law, contrary to the facts and must be quashed. 2. Disallowance of interest expense on External Commercial Borrowings C'ECBs') 2.1 On the facts in the circumstances of the case and in law, the Ld. AO/ Hon'ble DRP erred in making a disallowance of ₹ 38,53,481 towards interest expenditure incurred in relation to the ECBs availed by the Appellant for acquisition of fixed assets for continuation of its existing business, by invoking the proviso to section 36(i) (iii) .....

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circumstances of the case and in law, the Ld. AO/ Hon'ble DRP have erred in making a disallowance of ₹ 70,34,607 (i.e. ₹ 1,02,51,865 being the disallowance for the subject assessment year after allowing credit of ₹ 32,17,258 already disallowed in the previous assessment year 2010-11) on account of accruals created towards bandwidth and last mile services availed by the Appellant ignoring that the accruals were based on a reasonable and scientific basis. 3.2 Without prejudic .....

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9,438 (i.e. ₹ 1,20,98,089 being the disallowance for the subject assessment year after allowing credit of ₹ 23,68,651 already disallowed in the previous assessment year 2010-11) on account of year-end accruals representing accruals created towards normal business expenditure by the Appellant ignoring that the accruals were based on a reasonable and scientific basis. 4.2. Without prejudice, on the facts in the circumstances of the case and in law, the Ld. AO/ Hon'ble DRP erred in .....

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id to AT&T Communication Services India Private Limited ('ACSI'). 5.2 On the facts in the circumstances of the case and in law, the Hon'ble DRP erred in ignoring that the aforesaid disallowance on account of support service expenditure has been directed to be deleted by the Hon'ble DRP for the preceding assessment years. 6. Grounds relating to Transfer Pricing Matters: That, on the facts in the circumstances of the case and in law: 6.1 The Ld. Transfer Pricing Officer (TPO .....

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ermine the arm's length price of international transactions pertaining to availing of intra-group services from its AEs on a standalone basis by rejecting Transactional Net Margin Method ('TNMM') as the most appropriate method. 6.3 The Ld. AO/ TPO/ DRP erred in disregarding the elaborate documentary evidence submitted as part of assessment proceedings to erroneously assume that 'no benefit' has been conferred upon the Appellant from the international transactions pertaining t .....

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rnational transaction entered into with its AEs. 6.5 The Ld. AO/ TPO/ DRP erred, on facts in the circumstances of the case and in law, in arbitrarily selecting Comparable Uncontrolled Price ('CUP') method as the most appropriate method to benchmark the international transactions pertaining to availing of intra-group services by the Appellant from its associated enterprises, without duly establishing suitability thereof. 6.6 Without prejudice, the Hon'ble DRP erred in directing that p .....

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payable on salary and ₹ 66,090 on account of service tax payable under section 43B of the Act. 8. Non-grant of credit for taxes deducted at source and advance tax 8.1 On the facts in the circumstances of the case and in law, the Ld. AO erred in not granting credit of taxes deducted at source amounting to ₹ 23,23,33,857 and advance tax amounting to ₹ 8,05,39,706 claimed by the Appellant in its return of income filed for the subject AY. 9. Lew of interest under section 234.6 and .....

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of income on 30.11.2011 declaring income of ₹ 85,32,56,895/-. Subsequently, the return was picked up for the scrutiny and notice u/s 143(2) was issued on 19.09.2012. During the course of assessment proceedings reference u/s 92CA of the Act was also made by the ld. AO to the ld Transfer Pricing Officer to determine the arm‟s length price of international transactions entered into by the assessee with its Associate Enterprises. The Transfer Pricing Officer passed order u/s 92CA(3) of .....

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uently, the Assessing Officer passed order u/s 144C(13) of the Income Tax Act on 31.12.2015 determining the total income of the assessee at ₹ 1,22,62,04,402/- against the returned income of the assessee of ₹ 85,32,56,895/- making following additions and disallowances:- Particulars Amount in INR Returned Income 85,32,56,895/- Statutory Liabilities 1,66,97,014/- Transfer Pricing adjustment 21,57,89,704/- Interest on ECBs 38,53,481/- Infrastructure cost/Last Mile charges - Lack of suppo .....

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pect to the disallowance of ₹ 38,53,481 towards interest expenditure incurred in relation to the ECBs. At the beginning of the financial year relevant to the subject assessment year, ECB account had a credit balance of USD 22,500,000 as on April 01, 2010. During the financial year relevant to the subject assessment year, AGNS had availed additional ECB‟s of USD 2,500,000 on various dates. During the financial year, the appellant has incurred interest expense of ₹ 38,53,481 on a .....

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o ground in appeal of the assessee for AY 2009-10 & 2010-11. Parties also reiterated the same arguments. 8. We have gone through the relevant facts of the case and arguments and submissions advanced by both the parties in connection with the disallowance towards ECBs availed during the year. This ground of appeal has already been decided in AY 2009-10 in I.T.A. No. 2538/Del/2014 and AY 2010-11 ITA No. 1059/Del/2015 by orders of even date deleting the disallowance. Since there is no change in .....

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for services provided by other telecom operators). This amount of ₹ 175.03 crores included the payments amounting to ₹ 156.02 crores made during the year as well as the year end circuit accruals of ₹ 19.01 crores in respect of which bills/ invoices could not be received before March 31, 2011. Out of the accruals of ₹ 19.01 crores, invoices of ₹ 17.98 crores were furnished to the AO, and the balance accruals for which no bills/evidences for reversals could be submit .....

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been decided in AY 2009-10 in I.T.A. No. 2538/Del/2014 and AY 2010-11 ITA No. 1059/Del/2015 of even date where in the disallowance on identical facts and circumstances is deleted. Since there is no change in facts in this year from the facts in preceding year, we also direct the ld AO to delete the disallowance accordingly. Hence, this ground no 3 of the appeal is allowed. 12. Ground No. 4 of the appeal Disallowance of year-end accruals. The detail of year end provisions outstanding as on 31.03 .....

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crores Invoices Produced by the assessee 6.20 crores Reversal Entries filed by the assessee 6.61 crores Total Amount verifiable 12.81 crores Balance Amount 1.20 crores 14. Effectively, the AO made disallowance of ₹ 97,29,438/- (Rs. 1,20,98,089/- being the disallowance for the subject year after allowing ₹ 23,68,651/- credit for the amount disallowed in preceding year i.e. AY 2010-11). 15. Parties before us submitted that this issue is identical to ground in appeal of the assessee fo .....

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disallowance accordingly. In the result ground no. 4 of the appeal of the assessee is allowed. 17. Ground No. 5 of the appeal of Disallowance of Support Service expenditure. The appellant has incurred support service expenditure of ₹ 13,42,85,216 paid to its group company i.e. AT&T Communication Services India Private Limited ( ACSI‟) for support services rendered by it. The AO disallowed the expenditure on the basis that in AY 2008-09, on the same issue, department has filed app .....

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es in connection with the disallowance towards support service expenditure. This ground of appeal has already been decided in AY 2009-10, I.T.A. No. 2518/2014 and AY 2010-11 ITA No. 1778/2015 for even date and since there is no change in facts in this year from the facts in preceding year, we direct the ld AO to delete the disallowance accordingly for this year too. Accordingly, Ground no 5 of the appeal is allowed. 20. Ground No. 6 is on Transfer Pricing Adjustment. During the year, the assesse .....

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to be Nil and proposed an adjustment. 21. Parties before us submitted that this issue is identical to ground in appeal of the assessee for AY 2009-10. Parties also reiterated the same arguments. 22. We have gone through the relevant facts of the case and arguments and submissions advanced by both the parties in connection with the above adjustment to ALP of the international transactions . This ground of appeal has already been decided in AY 2009-10, I.T.A. No. 2518/2014 and AY 2010-11 ITA No. 1 .....

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